Need To Know: Analysts Just Made A Substantial Cut To Their Molecular Templates, Inc. (NASDAQ:MTEM) Estimates

Market forces rained on the parade of Molecular Templates, Inc. (NASDAQ:MTEM) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.

Following the downgrade, the most recent consensus for Molecular Templates from its seven analysts is for revenues of US$42m in 2021 which, if met, would be a huge 137% increase on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 28% to US$1.60. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$51m and losses of US$1.24 per share in 2021. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

See our latest analysis for Molecular Templates

There was no major change to the consensus price target of US$15.38, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Molecular Templates at US$22.00 per share, while the most bearish prices it at US$12.00. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's clear from the latest estimates that Molecular Templates' rate of growth is expected to accelerate meaningfully, with the forecast 215% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 32% p.a. over the past three years. Compare this with other companies in the same industry, which are forecast to grow their revenue 13% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Molecular Templates to grow faster than the wider industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Molecular Templates. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Molecular Templates after the downgrade.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Molecular Templates analysts - going out to 2025, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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